Military Redistribution: Nationalisation of the elite, new rules of loyalty and the chaebolisation of Russia

Military redistribution and loyalty standards

The time has come for a ‘big privatisation’, which, among other things, should affect assets ‘transferred to the treasury by court decisions’, Russian Finance Minister Anton Siluanov said last week. A few days later, at an extended meeting of the Prosecutor General’s Office, Prosecutor General Igor Krasnov reported that his subordinates had confiscated property worth 2.4 trillion rubles for the benefit of the state. Among the seized assets were five strategic enterprises, four of which, according to the agency, were under foreign control. In Vladimir Putin’s presence, Krasnov urged prosecutors to continue combating 'the use of private enterprises contrary to state interests'. Thus, the creeping redistribution of property, which began with the full-scale invasion of Ukraine and the severance of economic ties with the West, has found a new purpose. In 2024, as falling oil prices are expected to shrink government revenues, property seizures are now also seen as a way to replenish the treasury – while 'state interests' have become a legitimate (albeit legally dubious) justification for asset confiscation.

As we have previously written, the ongoing property redistribution in Russia has had different motives and driving forces at various stages (→ Re:Russia: Putin's Reshuffle). However, on the whole, it marks another phase in the transformation of Putin’s regime, characterised by further detachment from the West, the establishment of new loyalty standards, and the continued ‘nationalisation of the elite’.

The more internationally integrated segment of Russia’s business elite, which had strong economic and personal ties with the West, initially responded to the war with subdued grumbling. About a dozen and a half Russian businessmen even divested from Russian assets and severed ties with the country (→ Re:Russia: The Last Benefit). The leaked conversation between music producer Iosif Prigozhin and former senator and billionaire Farkhad Akhmedov, in which they criticised the invasion, was widely perceived as a reflection of the unspoken collective opinion of big business about the war and its consequences. This could not go unanswered, and the wave of deprivatisation became, in large part, that response. The remarks of Vladimir Potanin, a Yeltsin-era oligarch and Russia’s richest man, at the Russian Union of Industrialists and Entrepreneurs (RSPP) congress in Moscow this week, further reinforced this new reality. Potanin stated that Russian business should 'not make a fuss but follow the course of state policy… follow the political line set by our government and president'. This declaration can be seen as a new kind of oath and a fresh standard of loyalty shaped by the 'military redistribution'.

However, beyond punishing the unreliable and rewarding the loyal, this redistribution also serves to consolidate key industries under the management of Putin’s most trusted elites – preparing them for the coming 'generational transition'.

The initial stage: a legal emergency

The first phase of the redistribution was driven by the nationalisation and reallocation of Western company assets. Even at that early stage, the political potential of the process was evident: seized assets were distributed as rewards to loyal businessmen and affiliated business groups. Energy assets of Fortum and Uniper were handed over to Rosneft. Ramzan Kadyrov’s family took control of Danone’s Russian business. Taimuraz Bolloev, a close friend of Putin and former head of Baltika, was reinstated as CEO after the company was taken from Carlsberg. That said, Russian authorities initially exercised some caution – perhaps because they did not entirely rule out a future normalisation of business relations with the West, and because Russian companies' assets, including Rosneft’s, remained frozen in Western countries. In 2024, Danone and Carlsberg were even temporarily allowed to regain control over their Russian operations, but only so they could sell them to new owners at deep discounts. For example, Carlsberg managed to recover only 30% of its expected sale price.

The drive to consolidate Russia’s military-industrial complex has become the second major force behind the nationalisation of assets not directly linked to foreign ownership. According to calculations by Novaya Gazeta Europe and Transparency International Russia, prosecutors initially targeted enterprises in the defence industry, machine-building, and metallurgy. Just as with foreign-owned businesses, wartime conditions served as justification for extraordinary legal measures.

One of the most high-profile cases involved the seizure of three plants belonging to the Chelyabinsk Electrometallurgical Plant (ChEMK) from former Forbes listee Yuri Antipov. ChEMK, Russia’s largest producer of ferroalloys with an 80% market share, supplies metallurgical plants that, in turn, provide steel to defence manufacturers. The Prosecutor General’s Office deemed the 1990s privatisation of ChEMK illegal because it had not received explicit approval from the federal government (the lawsuit was originally filed in December 2022).

Between 2022 and 2023, Novaya Gazeta Europe and Transparency International Russia identified ten similar cases using this quasi-legal mechanism: an enterprise was declared 'strategic', and its privatisation – authorised by regional authorities in the 1990s – was retroactively ruled unlawful. The latest example of this scheme was the final repossession of 100% of Dalpolymetal, one of Russia’s largest producers of lead concentrate. Thus, the logic of wartime necessity has transformed into a new legal norm, allowing the government to annul privatisation deals up to 30 years later without any compensation.

‘Nationalisation of the elite’ and the three pillars of deprivatisation

By 2023, a growing number of cases began punishing perceived disloyalty. The most striking example was the seizure of auto dealership Rolf from its founder Sergey Petrov, who lives abroad and is known for his ties to the opposition. The mechanism used to nationalise foreign-owned businesses was applied to Rolf as well: by presidential decree, the company was placed under temporary state management. In the next phase, the Prosecutor General’s Office demanded its full nationalisation based on corruption charges against Petrov, accusing him of running the company while serving as a Duma deputy. Ultimately, Rolf was handed over to Umar Kremlev, head of the International Boxing Association, who Important Stories describes as a close associate of Putin’s security chief, Alexey Rubezhny.

This category of 'revenge cases' also includes the confiscation of assets linked to Ukrainian businessmen and individuals accused of supporting Ukraine and its military. Notable examples include the nationalisation of Metinvest Eurasia, owned by Rinat Akhmetov, and the Russian division of Global Spirits, which produces vodka under the Khortytsa and Moroshabrands. Global Spirits founder Yevhen Cherniak was placed on the Russian list of terrorists and extremists for allegedly financing the Ukrainian Armed Forces and was put on a wanted list.

By 2023, beyond the justifications of 'illegal privatisation' and retribution for disloyalty, deprivatisation had acquired a new systemic political motive tied directly to the 'nationalisation of the elite' strategy. Businesspeople increasingly faced prosecution for attempting to 'sit on two chairs' – continuing operations in Russia while maintaining legal grounds for business and residency in the West. To enforce this, in April 2023, amendments to the legislation were adopted that designated individuals with dual citizenship or foreign residency permits as 'foreign investors'. These amendments also made it easier for the state to seize 'strategically significant' enterprises under their control. The list of industries deemed 'strategically significant' includes 50 items and is periodically updated. In 2022, for example, maritime and river transport of certain government-specified cargo types was added to the list.

Among the assets already confiscated under this scheme is Metafrax, Russia’s largest methanol producer, which was taken from Forbes listee Seyfeddin Rustamov. In addition to claims that the privatisation was unlawful (prosecutors argued that the Perm regional authorities should not have approved it), the Prosecutor General’s Office pointed out that Rustamov held US residency and controlled Metafrax indirectly through an American company. The court finalised the case in a single four-hour session. Following the 2023 legal amendments, the 'foreign investor' label was retroactively added to previously initiated 'illegal privatisation' cases, such as that of ChEMK.

According to the law firm NSP's calculations, as of October 2024, violations during privatisation were the most common legal basis for asset seizures. By that time, prosecutors had launched 29 such cases, six of which involved 'foreign investors'. The second most common pretext was corruption charges against owners, with NSP identifying 17 such cases. Corruption allegations were used both as a primary deprivatisation tool and as a safeguard. In major cases, prosecutors frequently combined all three arguments: illegal privatisation, foreign investor involvement, and economic crimes.

By presenting this legal arsenal to deprivatisation targets, prosecutors sought to paralyze resistance. While politically motivated charges (illegal privatisation and foreign investor status) left room for negotiating a reduced personal impact, corruption or economic crime allegations carried far more severe consequences. Furthermore, corruption charges undermined legal defences against privatisation-related accusations. A key ruling by the Constitutional Court in October 2024, in a case involving the nationalisation of Pokrovsky Concern (established by former presidential envoy aide Andrey Korovaiko and ranked 28th among Russia’s largest landowners, according to the consulting company BEFL) confirmed this. The ruling stated that while a 10-year statute of limitations applies to privatisation violations, it does not apply to corruption cases – effectively rendering privatisation-related defences useless, as seen in Pokrovsky Concern’s case.

Four waves of deprivatisation

The war-driven redistribution of property unfolded in waves. The first wave targeted foreign-owned assets. The second wave, identified by Novaya Gazeta Europe and Transparency International Russia, spanned February–August 2023, during which prosecutors filed 20 nationalisation lawsuits. A pause followed, as Putin sought to reassure alarmed business leaders at the Eastern Economic Forum. However, the process resumed toward the end of the year, with seven more lawsuits filed, and continued into early 2024. In January, following an industrial accident, Putin ordered the nationalisation of the Klimovsk Specialised Cartridge Plant. In February, prosecutors moved against ChEMK and the Ivanovo Heavy Machine Tool Plant. In March, they targeted Ariant (Russia’s largest wine producer) and Makfa (the largest pasta producer). Ariant was taken from ChEMK co-owner Alexander Antipov, who also lost several other assets, including the Serov Ferroalloy Plant and Kuznetsk Ferroalloys.

The third wave of deprivatisation spanned late 2023 to mid-2024. Another brief pause followed in the summer, with relatively few cases emerging in the latter half of the year. However, two stood out due to their scale. In August, prosecutors seized Raven Russia, the country’s largest warehouse operator. By the end of the year, they moved against Rodnye Polya (formerly RIF Trading House and Promexpeditsiya), one of Russia’s largest grain exporters.

In total, according to The Moscow Times, by the end of 2024, at least 67 companies had been nationalised. Some belonged to the same owners, but their total asset value exceeded 550 billion rubles, with combined revenues surpassing 800 billion rubles. While this accounted for only about 0.4% of Russia’s GDP, the largest confiscated assets were significant. These included holdings from former Yugra Bank owner Alexey Khotin (worth over 100 billion rubles), auto dealership Rolf (over 68 billion rubles), and ChEMK (over 61 billion rubles).

The largest asset that the Russian state will take away from ‘foreign investors’ in 2025 is likely to be the company that manages Domodedovo airport. In 2013, when its potential sale was last discussed, media sources estimated the deal at around $5 billion. A similar valuation was given by US investment banks ahead of an IPO planned for 2011 in London.

Nationalisation without the elite

The 2023 amendments to Russia’s foreign investor laws and the first cases under these provisions were initially interpreted as a signal to Russian business: ‘it’s time to come back’. However, the reality of Putin’s regime proved far more complex. On one hand, many Russian businessmen continue to operate and reside in a dual system, maintaining assets both inside and outside Russia. On the other hand, even efforts to repatriate business holdings do not guarantee protection if an asset is of interest to the state or influential regime insiders.

In 2024, Domodedovo owner Dmitry Kamenshchik re-registered airport-related assets in Russia – previously, they had been structured through Cypriot entities. However, according to the prosecutor's office, this merely created a 'false appearance of the absence of foreign control', allowing Kamenshchik and his partner Valery Kogan to 'pursue the aggressive policies of Western states aimed at strategically defeating Russia by damaging its economy'. These allegations are based on Kamenshchik’s past or present residency in Turkey and the UAE, as well as Kogan’s Israeli citizenship. Notably, Kogan was not even formally listed as a beneficiary of DME Holding, the company established last year to control Domodedovo-related assets. Kamenshchik, who, according to Kommersant's sources, gave up his Turkish passport ‘long ago’, remains the sole controller of the company.

Two other high-profile cases followed a similar pattern. In August 2023, prosecutors targeted Raven Russia, the country’s largest warehouse operator, and by the end of the year, they moved against Rodnye Polya, one of Russia’s largest grain exporters. Like Kamenshchik, Rodnye Polya beneficiary Petr Khodykin had re-registered his assets in Russia back in 2023. The businessman was compromised by his citizenship of Saint Kitts and Nevis (a passport often obtained by wealthy individuals for visa-free travel) and his UAE residency. Prosecutors further argued that Khodykin’s business should never have been structured abroad in the first place due to its 'strategic importance'. Khodykin argues that such restrictions did not exist at the time. He also emphasised his consistent adherence to evolving government regulations – both formal and informal. For instance, he justified transferring assets from Cyprus to the UAE in 2019 as an 'anticipatory move' in response to 'growing pressure on ‘unfriendly jurisdictions'.

The Raven Russia case resembles the previous two but has a unique distinction: the business was seized from owners who acquired it after the war began. In the early 2000s, British businessmen Anton Bilton and Glyn Hirsch founded Raven Russia, later listing shares on the London Stock Exchange’s alternative market. After Russia’s invasion of Ukraine, the company was delisted, re-registered in Russia, and sold to top managers Igor Bogorodov and Yaroslav Shuvalov. Prosecutors now claim that Raven Russia was illegal from the outset – foreigners had no right to acquire 'strategic assets' without government approval. They also argue that transferring ownership to Russian managers was a sham, as foreign interests allegedly continued to control the company. Furthermore, one of the new Russian owners was also labeled a 'foreign investor' – Bogorodov was found to hold US citizenship.

Unexpectedly, former Rosneft CEO Sergei Bogdanchikov also found himself branded a 'foreign investor'. He and his partner Mark Garber lost their stakes in the oil and gas projects Sakhalin-1 and Sakhalin-2. According to Kommersant, Bogdanchikov holds a Saint Kitts and Nevis passport, while Garber possesses unspecified 'foreign residency'. This information surfaced during a special supervisory audit aimed at 'identifying foreign control over enterprises of strategic importance to Russia'. Prosecutors also reinforced their case by accusing Bogdanchikov of abusing his position as Rosneft president (1998–2010) for 'illegal personal enrichment'. They argue that this facilitated his acquisition of the very assets now being seized.

In the case of the nationalisation of Borets, an oilfield services company supplying equipment for 80% of Russia’s oil production, follows a similar logic. Prosecutors claim the firm is controlled by former Yukos shareholder Leonid Nevzlin, alongside his partners Mark Shabad and Gregory Shtulberg – both of whom are Soviet-born but hold British and Swedish citizenship, respectively. Although Borets has been registered in a special economic zone in Kaliningrad, a so-called Russian offshore, since 2023, prosecutors assert in their lawsuit that this is mere 'appearance'. The same language used in the Domodedovo case. They allege that Nevzlin, Shabad, and Shtulberg continue to control the company while 'pursuing the aggressive policies of Western states aimed at strategically defeating Russia' – a phrase lifted verbatim from the Domodedovo lawsuit. Additionally, they accuse them of illegally transferring profits abroad.

Chaebolisation strategy and win-win in Putin's way

As previously mentioned, there is no single strategy for deprivatisation – it serves a broad range of objectives, and companies from vastly different sectors and specialisations find themselves in its crosshairs. However, in several of the most high-profile cases, a clear pattern emerges: the consolidation of industry-specific mega-holdings under the control of the regime’s most trusted figures.

The company that has acquired the most assets (five in total, according to Re:Russia) is Roskhim, which has been accumulating chemical production facilities since 2021. The media link it to Putin's friend Arkady Rotenberg. The Bashkir Soda Company and the Kuchuksulfate plant, which came under Roskhim's control in 2023, were nationalised in 2021. Perm Metafrax (the largest producer of methanol), Dalnegorsk Mining and Processing Plant (the only producer of boric acid) and Volga Orgsynthez (a major producer of aniline, methionine, flotation agents, sulphur carbon, etc.) were nationalised in 2023 and taken over by Roskhim in 2024. The process followed the same pattern in each case: first, the enterprises were transferred to the ownership of Rosimushchestvo (the Federal Agency for State Property Management). In some cases, Rosimushchestvo immediately handed them over to Roskhim for temporary management, and after a period of time, it held closed auctions where Roskhim was the sole bidder. As a result, for example, Metafrax was bought out for a symbolic 14.7 billion rubles – about half of the company's annual revenue.

In other respects,defence-related enterprises are more likely to be absorbed by Rostec, while large agricultural assets (such as Makfa and Ariant) may end up under Rosselkhozbank’s control – eventually becoming part of an emerging agribusiness chaebol under the patronage of Deputy Prime Minister Dmitry Patrushev Jr. (→ Re: Russia: New Oil for the New Patrushev). Meanwhile, port infrastructure is seemingly being consolidated under Rosatom, which oversees the development of the Northern Sea Route. This includes the acquisition of Far Eastern Shipping Company and Kaliningrad Port.

As in the case of Roskhim, this process began even before the war but has since gained momentum with the simplification of asset seizure procedures. Far Eastern Shipping Company was a key asset in the logistics empire of Ziyavudin and Magomed Magomedov. In December 2022, a court found them guilty of organising a criminal enterprise, embezzlement, and fraud, sentencing them to long prison terms. Their assets were never put up for auction – Rosatom simply received them as a state property contribution. Kaliningrad Port, which was seized from Sovfracht head Dmitry Putrim and his partners (who were designated 'foreign investors'), has not yet been transferred to Rosatom. According to ‘Vedomosti’, the state corporation is not particularly interested in the asset due to its poor condition. Thus, this phase of wartime redistribution appears to be a continuation of the chaebolisation of the Russian economy, which is a trend that began in the late 2010s.

One way or another, the potential for further redistribution is far from exhausted. The new elite configurations are leading to the political weakening of several once-powerful industrial and financial groups, which will have to accept the partial expropriation of their assets. The government’s fiscal interests, as articulated by Finance Minister Anton Siluanov, will only fuel further appetite for redistribution. And while reprivatised assets are typically transferred to trusted hands at prices well below market value, the state treasury stands to benefit alongside the new owners – thanks to the outright confiscatory nature of these seizures.